Govt starts year with capex push as spending rises 61%, fiscal deficit stays in check

"The GoI capex surged... well above the average monthly required rate of Rs. 0.9 trillion for the fiscal.

However, this was offset by the modest contraction in revex in the month, which contained the growth in total expenditure to nearly 10 percent. Given this, and the 21 percent growth in revenue receipts, the fiscal deficit was limited at Rs 1.9 trillion in April 2025, lower than the Rs 2.1 trillion in the year ago month,” said Aditi Nayar, chief economist, ICRA.

State and central government spending was one of the reasons for the fourth quarter GDP to rise to its highest level in a year of 7.4 percent.

Investment demand was the highest in six quarters at 9.4 percent in January-March period, with gross fixed capital formation accounting for 33.9 percent share of the GDP.

The rise in capex did not disturb the fiscal math, with fiscal deficit for April 11.9 percent compared with 13 percent in April 2024.

The government will have less to worry about on the spending front, as the RBI is set to transfer a record dividend of Rs 2.7 lakh crore.

Experts indicate that it is expected to provide succour to the government to help contain the deficit below its target of 4.4 percent, with some even suggesting a lower 4.2 percent reading.

Government’s capex push would be necessary to keep the economy going in FY26, especially as private sector’s intention are mired by lower spending.

A report by statistics ministry revealed that private sector is expecting to spend 25 percent less this fiscal.

India’s growth, however, is expected to stay on track, with the economy averaging 6.3 percent growth.